Fama's Llamas Has a Weighted Average Cost of Capital of 9.5

question 62

Multiple Choice

Fama's Llamas has a weighted average cost of capital of 9.5 percent.The company's cost of equity is 15.5 percent,and its pretax cost of debt is 8.5 percent.The tax rate is 34 percent.What is the company's target debt-equity ratio?

• A)0.89
• B)0.92
• C)0.98
• D)1.01
• E)1.54

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Definitions:

Assimilation

In cognitive development, Jean Piaget's concept where individuals integrate new information into existing cognitive schemas or frameworks.

Existing Schemas

Mental structures or frameworks that organize and interpret information, influencing cognition and perception.

Egocentrism

In Piaget’s theory, the preoperational child’s difficulty taking another’s point of view.

Cognition

The mental action or process of acquiring knowledge and understanding through thought, experience, and the senses.